ECB monetary policy surprises and Euro area sovereign yield spreads Online publication date: Mon, 01-Oct-2018
by Abdelkader Derbali; Tarek Chebbi
International Journal of Management and Network Economics (IJMNE), Vol. 4, No. 2, 2018
Abstract: The importance of ECB monetary policy surprises in explaining movements in Euro area sovereign yield spreads is explored using daily data for ten countries for 2011-2015. The unanticipated component of the monetary policy is extracted by using changes in the three-month Euribor futures rate immediately after the ECB meetings. Our results show that monetary policy surprises from the ECB, when significant, exert a strong influence on yield spread returns and volatilities. The effects of ECB news announcement surprises on the debt markets differ substantially across PIIGS and non-PIIGS countries. It is important to note that the persistence of volatility is clear across all samples and it shown by the significance and the positive sign of associated coefficients.
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